What type of lender is right for your investment property?
Just as there are lots of home loans to choose from, there are different types of institutions who can lend money. From banks to building societies, we help give you a better understanding of their differences so you can make a the right decision for your investment loan.
There are lots of different financial institutions out there in Australia, but below we will focus on the main types you will typically come across while trying to invest in property.
This is probably the type of lender you’re most familiar with. Banks are the most well-known financial institutions and it’s likely you have an account with one. Many people go with the bank they have their savings or transaction account with to get their first home loan, but it’s worth shopping around for the best deal — especially when you’re buying as an investment.
Banks generally have a large network of branches, so you can visit one almost anywhere, although internet banking has made branch access less important for many people.
Building societies, credit unions and member-owned banks all fall under the same banner of ‘mutuals’. They are owned by members not shareholders — which is one of their main differences from other, vanilla banks.
Some people feel a real sense of loyalty towards building societies and credit unions. They value the sense of ownership and personalised experience they often receive.
Non-bank lenders are privately-owned institutions, which are neither banks nor mutuals as they do not hold a banking licence. But don’t let that put you off, they still must abide by the same laws and regulations, which govern all credit transactions in Australia.
An advantage of non-banks is that since they are smaller they can offer a higher level of customer service and are more interested in tailoring loans to individual needs. They borrow funds at wholesale prices and can often provide lower interest rates than banks.
All of these institutions may provide investment home loans, though the way they each operate can differ dramatically. The most significant difference between them is their ownership structure and how that affects their services and products.
Banks (and non-banks) are generally owned by shareholders and are listed on the stock exchange. In contrast, mutuals like building societies and credit unions are owned by their members.
Rather than passing on profits to shareholders, mutuals aim to pass profits on to their members in the form of better interest rates, lower fees and improved banking products.
As you might expect, there’s no easy answer. No single mortgage lender is right for every investor. That’s because lenders each have different rules or lending criteria for their home loans — you may be treated differently, for instance, if you’re looking to buy an investment and already have a home of your own.
What matters is that you have the home loan that is right for your needs. Every investor’s financial situation, credit history, and property needs are different. It’s worth comparing as many loans as possible to find one that’s right for you.
You might be a long-term customer of a bank, non-bank lender or building society. But they may not always have the right investment loan for your needs. That’s where an Aussie Broker comes in. They work with different many different lenders, which means you’re able to compare many different investment loan options through the same contact.